Advances in Electronic Banking Technology

CONSUMER'S ACCEPTANCE OF ONLINE BANKING

Submitted to Prof. Vishal Mishra

Submitted by: Group 3

Avinash (06BS0721)

Debashis Chand (06BS0947)

Dinesh Saboo (06BS1043)

Gaurav Srivastava (06BS1183)

Hareesh Nookala (06BS1250)

Pavan Kumar (06BS1575)

Pooja Choudhary (06BS2280)

ABSTRACT

Advances in electronic banking technology have created novel ways of handling daily banking affairs, especially via the online banking channel. The acceptance of online banking channel has been rapid in many parts of the world, and according to a recent research article, in the leading e-banking countries the number of e-banking contracts has exceeded 50%.

According to a recent survey conducted by the Indian Banking Association, perceived usefulness and information on online banking on the website were the main factors influencing online banking acceptance.

TABLE OF CONTENTS Page no

Introduction 4

Literature review 5

Objectives 6

Research methodology 6

Independent & Dependent variables 7

Rationale for arriving at 5 hypothesis 8

Rationale for choosing Independent variables 8

Factor analysis 11

Results 12

Scope for further study 12

Conclusion 13

References 14

Annexure 15

Questionnaire 20

INTRODUCTION

Since the mid-1990s, there has been a fundamental shift in banking delivery channels toward using self-service channels such as online banking services. During the past years online banking acceptance has been rapid and currently 25 percent of the private banking customers in India have an online banking contract with their bank. In general, Europe has been and still is the leader in online banking technology and usage. Although in recent years the number of customers utilizing online banking has grown rapidly in India, there is some evidence supporting the opposite fact that online banking acceptance is faced with problems.

Online banking in this study is defined as Internet portal, through which customers can use different kinds of banking services ranging from bill payment to making investments. Therefore banks' Web sites that offer only information their pages without possibility to do any transactions are not qualified as online banking services. The goal of this article is to increase our current understanding of the factors that influence online banking acceptance. More precisely, online banking acceptance will be studied from the information systems acceptance point of view referring to the idea that consumers are using banks information system (online banking service) directly and hence more knowledge on the factors that affect information systems adoption is needed in order to better understand and facilitate the acceptance.

This article is divided into four parts: the first part contains a literature review on online banking and information systems acceptance. The second part presents the research methodology used in this work. The third part comprises of the results and analysis. In this part the data is analyzed using a Factor analysis. The final part consists of the conclusions and practical implications of the research.

LITERATURE REVIEW

Online banking acceptance studies Online banking acceptance has gained special attention in academic studies during the past five years as, for instance, banking journals have devoted special issues on the topic (e.g. Karjaluoto et al., 2002; Waite and Harrison, 2002). We can find two fundamental reasons underlying online banking development and diffusion. First, banks get notable cost savings by offering online banking services. It has been proved that online banking channel is the cheapest delivery channel for banking products once established. Second, banks have reduced their branch networks and downsized the number of service staff, which has paved the way to self-service channels as quite many customers felt that branch banking took too much time and effort. Therefore, time and cost savings and freedom from place have been found the main reasons underlying online banking acceptance. Several studies indicate that online bankers are the most profitable and wealthiest segment to banks. On this basis, no bank today can underestimate the power of the online channel. Luxman (1999) for instance estimates that in the near future the online channel reinforces its importance especially in the countryside, where banks have closed many branches. Without the possibility

...